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Lara Conrad
Group Lead, Engineering
Regulatory & Government Relations
• Introduction to Encana
• North American Shale Gas
• Canadian Natural Gas Competitiveness
• Environment
The New Encana
Leading North American Natural Gas Resource Plays
MMcf/d
4,500
4,000
3,000
2,500
2,000
1,500
1,000
500
0
XOM & ECA COP DVN BP APC CHK RDS CVX EOG
XTO
Greater Sierra*
2010F: 245 MMcfe/d
Strategic Focus
Montney
2010F: 285 MMcfe/d
• Operate safely with minimal
Cutbank Ridge**
environmental impact while 2010F: 400 MMcfe/d
securing license to operate
• Deliver high return growth
Bighorn
• Actively manage portfolio to 2010F: 205 MMcfe/d
maximize value
• Leverage technology CBM
2010F: 325 MMcfe/d
advancements and
operational efficiencies to
lower capital costs Key Resource Play
Emerging Play
Resource Triangle
Increased operating challenges
Conventional
resources
Improved technology
Small volumes that Conventional
Increased cost
are easy to develop
Shale Gas
Gas hydrates
Shale Basin Development
Algae Algae
Clay from Bloom
Bloom
Shore
Sediments
from Land
X X
Types of Rock Oil and Gas is
produced from
• Fit-for-purpose rigs
• Long reach
horizontal drilling
• Multi-stage
massive hydraulic
fracturing
• Multi-well drilling
pads
• Manufacturing
style approach to
all operations (gas
factories)
Upper
Mnty
Lower
Mnty
80
70
60 43 Bcf/d
> 50%
50
40
30
20
10
0
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20
We expect supply to continue falling for the next three years, then a recovery begins as
significant volumes of production are reached by new unconventional plays.
18
Forecast
16
14
12
Bcf/d
10
4
05
06
07
08
09
10
11
12
13
14
15
16
17
18
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
n-
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Conventional Montney Horn River Deep Basin CBM
50
40 21 23
30
10 10
20
15 15
10
0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
North American
Resource Estimates
Years of
Supply Tcf
120 3300
91 95
100 2750
82 85
79
80 2200
56
60 1650
40 1100
20 550
Gas Shale Plays
0 0
are Industry Changing PGC EIA/NEB Navigant ICF EIA/NEB PGC
Breakthrough 2006 2007 2008 2008 2009 2009
8.00
7.00
6.00
5.00
4.00
3.00
2.00
Jan-2007 Jun-2008 Oct-2009 Feb-2011 Jul-2012
Encana’s Future Vision
The natural gas economy / demand side management
17
55 16
15
50 14
13
45 12
EIA WCSB 11
40 10
Ja 5
Ja 6
Ja 7
Ja 8
Ja 9
M 05
M 06
M 07
M 08
M 09
10
Se 5
Se 6
Se 7
Se 8
Se 9
-0
-0
-0
-0
-0
0
0
p-
p-
p-
p-
p-
n-
n-
n-
n-
n-
n-
ay
ay
ay
ay
ay
Ja
• Encana operated
• 800 MMcf/d capacity Kiwigana JV
• Onstream Q3 2012F
• Spectra Fort Nelson
• Reactivation to 1 Bcf/d
• FN North (250 mmscfd)
• Onstream Q2 2012F
• TCPL system extension
Competitiveness Challenges
Remote / challenging environment – Impact on capital costs
• Innovative
• Simultaneous
operations
• Reduce costs
• Improve
efficiencies
• Reduce
environmental
footprint
• Transferable
learnings
across portfolio
Industry Addressing the Competitiveness Challenge
Continuous cost improvements
0.95
0.79
0.65 0.61 1.0
0.6
2006 2007 2008 2009 2010F 2008 2009 2010F
Industry Addressing the Competitiveness Challenge
Continuous productivity improvements
3.9
• Increased stimulation size 3.7
2.1
• Enhanced pay selection
2006 2007 2008* 2009 2010F
*Decrease due to stepping out of core
Horn River
MMcfe/d 11.7
9.1
4.6
• Comprehensive Plan
• Continued strong investment
• Royalties & growth of existing plays
• Net Profit Regime
• Targeted royalty
programs • Emergence of new world class
• Stimulus programs unconventional plays
• Infrastructure support
• Regulatory reform "The Steeprock gas plant
has benefited from
comprehensive B.C.
• Stakeholder engagement programs that have
encouraged investment,
proving yet again that we
have a plan, and that plan is
working to bring jobs and
prosperity to British
Columbia."
British Columbia Premier Gordon Campbell
Environment
Recognizing the Opportunity
Potential to Gain Market Share
CO2 SO2
250,000 3,000
2,500
200,000
CO2 SO2
2,000
150,000 CO2
1,500
100,000 CO2
SO2 1,000
50,000
500
SO2
0 0
Coal Oil Natural Gas
Source: EIA
Canada’s Natural Gas Highways
Cleaner, Affordable, Create Jobs, Economic Growth
0.80
B-C76-K
0.60
0.40
0.00
0 20 40 60 80 100 120 140 160
Cumulative Flow Time (Days)
80%
% of 1st 30 Day Average
60%
40%
20%
0%
1 4 7 10 13 16 19 22 25 28 31 34
Months On (Month = 30d)
MMcf/d
Horn River Key Technical Advancements
• Vertical Hz placement staggering
• Longer Hz laterals
• Increased frac stages/well
• Subsurface frac water source
• Debolt:
• Significant non-potable water source
• 2010 water treatment plant
14-Stages / Well (2009) 21+Stages / Well (2010)
16 m
22 m
00
00
Montney
Exciting Development Opportunity
600 300
400 200
200 100
0 0
0 5 10 15 20 25 30 35 40
Months
10
8
Gas Rate (MMcf/d)
0
0 100 200 300 400 500 600 700
Days on Production
Rates of Return at Various NYMEX Gas Prices • Lower long-term natural gas
$/MMBtu price in the $6-7/MMBtu
9.00
range based on 2010F input
costs
8.00
• Price range to rise and
fall with input costs
7.00 Potential
Expected range of movement • Attractive returns due to
natural gas price due to
external optimization and economies
6.00
factors of scale even with lower
long-term price expectations
5.00
Potential impact of future
• Focused on maximizing
portfolio high grading and gas margins (recycle ratio)
4.00 factory evolution
• Expect portfolio high grading
to improve supply costs over
3.00
9% 20% 40% 60% time
After-Tax Rate of Return